Delhi’s EV Policy Mulls Carbon Credit Incentives

Delhi’s EV Policy Mulls Carbon Credit Incentives

Why in the News ?

The Delhi government is drafting its Electric Vehicles Policy 2.0, which includes a proposal to award carbon credits to EV buyers. While intended to boost EV adoption, experts warn of implementation challenges, pricing uncertainty, and market access issues.

About the Proposal and Objectives of Delhi EV Policy 2.0 :

●The Delhi government plans to offer carbon credits to electric vehicle (EV) buyers.

●Aim: Promote tailpipe-emission-free vehicles and reduce air pollution.

●EV owners would earn credits over time for avoiding carbon emissions.

● These credits could be traded, potentially reducing the total cost of ownership for EVs.

Challenges and Industry Concerns

●No global precedent exists for awarding credits to EV buyers directly.

●Major issues:

○Methodology for credit calculation

○Pricing uncertainties (₹200–1,600 annual value estimated)

○Lack of clear trading platforms for individuals

● Experts suggest giving credits to manufacturers or having the government aggregate and sell credits.

● Accurate CO₂ offset estimation requires tracking vehicle usage, grid emissions, and more.

Global Examples and Policy Recommendations:

●China: Awards credits to EV manufacturers, driving production.

● California: Credits go to charging companies, attracting over $28 billion in 2023.

●Experts call for:

○Clear guidelines for credit trade

○ Integration with other financial incentives

○A regulated, mature carbon market to ensure value

●Experts believe credits could be impactful if properly structured and bundled with existing benefits.

Understanding Carbon Market :

●Purpose: Market-based mechanism to reduce greenhouse gas emissions by incentivizing individuals and organizations to lower their carbon footprint.

●Cap-and-trade system: Government sets a cap on emissions, and entities trade carbon credits within this limit.

Types of Carbon Markets

●Compliance Markets: Mandatory for regulated entities (e.g., industrial polluters) to purchase carbon credits to offset emissions.

●Voluntary Markets: Allow individuals, businesses, and organizations to buy carbon credits beyond regulatory requirements.

●India’s Role: India is a significant exporter of carbon credits to the voluntary market, contributing 17% of global supply in 2022.

About Carbon Credits & Taxes:

●Carbon Credits: Represent one ton of CO₂ reduced or avoided, generated through activities like energy efficiency, reforestation, or renewable energy adoption.

●Carbon Taxes: A levy on emissions that generates revenue for climate projects or tax reductions.

Current Government Initiatives in India:

●Carbon Credits Trading Scheme (CCTS): Launched under the Electricity Conservation Act, 2001, and Environment (Protection) Act, 1986.

○Starts compliance trading in 2025-26.

●Other Schemes: Perform, Achieve, and Trade (PAT) and Renewable Energy Certificates (REC) systems.

●Monitoring: Bureau of Energy Efficiency (BEE) and National Steering Committee for Indian Carbon Market (NSCICM) oversee credit integrity.